Ensuring effective controls over credit card use


Government entities should enact a credit card policy that provides for all individuals issued credit cards.

Credit cards serve as useful tools for governmental entities in procuring good and services. However, there are certain transactions for which governments typically use credit cards that, by their very nature, provide the opportunity for misuse if effective controls are not in place. It’s a matter that’s received more publicity of late, even prompting a public hearing earlier this month.

 

Whether such purchases are made for travel, meals or otherwise, establishing effective controls and a system of checks and balances is imperative, as with any other form of expense accounting. Some of the key considerations should include the following:

  • Government entities should enact a credit card policy that provides for all individuals issued credit cards, and accounts for prohibited transactions and the entity’s documentation policies, requirements and procedures. That means considering whether employees will be allowed to hold cards on a regular basis, or whether an employee – usually the purchasing agent – should retain all cards and then issue them to employees as needed. For reference, the Louisiana Legislative Auditor has prepared a sample policy, which can be found on its home page.
  • For purchases of meals, governments should require that employees provide the itemized detail receipt showing all items purchased, as opposed to the credit card receipt showing only the total. Employees should also document – perhaps by simply writing on the back of the receipt – who was in attendance and what was the purpose of the expense.
  • An employee in the finance department should be assigned the task of preparing a reconciliation of the credit card statement and ensuring all transactions are documented and posted to the general ledger. Governments should also enact a standard form employees can use to document the credit card transaction, which should then be reviewed and signed by a supervisor.
  • While credit cards can be an effective tool, the use of debit cards should be prohibited. Credit cards provide monthly statements, which can be reviewed, reconciled and investigated. On the other hand, purchases made with a debit card are a circumvention of the government’s controls over procurement and disbursements.

Supervisors or other members of government entities with questions regarding the use of credit cards, or simply seeking suggestions for strengthening their internal controls, should contact LaPorte CPAs & Business Advisors Public Sector Industry Group leader John Murray, CPA, CGFM, at jmurray@laporte.com.

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